Hitachi is to acquire ABB’s power grids business and has signed an agreement with ABB to that effect. Hitachi plans to initially acquire an 80.1% stake and expects to close the acquisition in the first half of 2020, making Power Grids a consolidated subsidiary. Hitachi has a purchase option to acquire the remaining 19.9% stake.
Hitachi says it will offer “innovative energy solutions globally by combining ABB's world-class grids offering including advanced digital grid solutions with Hitachi's digital technology.”
According to Hitachi’s own analysis the power grids market is rapidly expanding driven by increasing adoption of renewable energy, rising energy demand and supply in emerging countries, the expansion of distributed power sources such as electric vehicles and storage batteries, deregulation of the electric power sector in countries and regions, and advances in electric power system reform. The market is forecast to reach more than US$100 billion by 2020, at a steady annual growth rate of 4% or above for the period from 2017 to 2020. In particular, advanced energy management systems to optimise supply of, storage and control energy using digital technologies are growing rapidly as well as innovations in grid systems for next generation transmission networks.
Hitachi and ABB have agreed the enterprise value of the company operating power grids business separated from ABB as US$11 billion. The purchase price of 80.1% stake is expected to be US$ 6.4 billion after deducting debt items from the enterprise value. The final price will be determined after customary adjustments for net working capital and net debt at the closing date.
ABB power grids' revenues totalled US$10.0 billion for 2017, and operational EBITA was about US$ 1 billion for 2017. The division has approximately 100 manufacturing bases, and around 200 sales locations globally.
ABB’s power grids business operates four segments. "Grid Automation" provides protection control system and remote monitoring control systems to realise grid network stabilisation, and management systems for supply and demand electricity market for trading electricity; "Grid Integration" includes digital substation, system integration and service solutions, high voltage direct current (HVDC) systems, and power semiconductors; "High Voltage Products" includes gas insulated switchgear (GIS); and "Transformers" includes power, distribution and transaction transformers for railways.
In the HVDC market, which is expanding with the increased take up of renewable energy, ABB has undertaken around 120 HVDC projects representing a total installed capacity of more than 130 000 MW, which accounts for about half the global installed base and possesses the most advanced technologies.
In December 2014, Hitachi entered into a strategic partnership agreement with ABB and in November 2015 formed a joint venture for HVDC operations in the Japanese market, offering solutions to reform the power systems for domestic electric power companies.
Toshiaki Higashihara, president & CEO of Hitachi, Ltd., commented: "This agreement … is a significant turning point in the global power and energy markets at a time when digital technology is fundamentally changing our society and the pattern of energy demand and supply is diversifying. Hitachi will combine ABB's strengths in the power grids business with our digital technology to build an energy platform that contributes to innovating the energy business. This creates further innovation for business fields such as life and industry and helps us address society's issues and improve quality of life"
Ulrich Spiesshofer, CEO of ABB, said: "The combination of ABB’s power grids business with Hitachi positions [the] power grids business for a successful long-term future as a globally leading infrastructure business. We crystallise the value we have built through the transformation of the last years and focus new ABB on digital industries. ABB’s power grids business will strengthen Hitachi as global leader in energy infrastructure and Hitachi will strengthen the position of ABB’s power grids business as a global leader. Our shareholders will directly benefit through the return of the proceeds of the divestment. Building on our existing partnership announced in 2014, the initial joint venture will provide continuity for customers and our global team."